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Kyle was founded in 1881 by Captain Fergus Kyle. The site was chosen because of its proximity to the International–Great Northern Railroad line.

From 1892 to 1901, Kyle was the childhood home of Pulitzer Prize-winning author Katherine Anne Porter. Many of her most famous short stories, such as "Noon Wine", are set in locations in and around Kyle. Her former home is now a writer's residence open to the public by appointment. The Katherine Anne Porter Literary Center hosts readings by visiting writers.

Kyle is home to Plum Creek Golf Course, a public golf course located 1 mile north of downtown. East of downtown is Steeplechase Park, hosting an 18 hole frisbee golf course, and a playground.

Kyle is served by the Hays Consolidated Independent School District, with high school students attending either Jack C. Hays High School or Lehman High School. Major employers include Grande Communications (telecommunications), Hays Consolidated Independent School District, and businesses in nearby San Marcos. Located 15 miles from Austin and 50 miles from San Antonio, the area is perfectly positioned to take full advantage of the fast growing IH-35 corridor.